We are now well along the downward track on the real estate cycle; and if you can predict when the upturn will start, you can probably predict when interest rates will rise too.

Over at Westpac, economists write: "In Auckland, house prices are now falling gradually on a monthly basis, are down 2 per cent since February. Average prices in the region are now back at August 2016 levels."

The economists note that outside of Auckland, house prices rose a touch in May, and are up 6.8 per cent on a year ago.

"A year ago, annual house price inflation outside of Auckland was running at a rate of 11 per cent, and two years ago it was almost 16 per cent.

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"The slowdown in the housing market in recent months has matched our expectations that the changing policy backdrop would be a significant drag. In March we saw the holding period for taxing capital gains on investment properties extended from two years to five years (the so called 'bright line' test).

"At the margin, this may have prompted some investors to bring their purchase of properties forward ahead of the changes coming into effect."

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Westpac's economists expect the housing market to cool further as more of the Government's policies designed to slow the housing market start to bite, and predicts zero house price growth by the year end. It's not pretty, but it is just a part of the property cycle — this too shall pass.

Foreign buyers
The Real Estate Institute says the Government's softer stance on foreign buyers of real estate won't solve housing price issues.

The institute's CEO, Bindi Norwell, says: "Allowing up to 60 per cent of apartments to be purchased by offshore buyers will ensure that we don't constrain supply."

Norwell says it's not worth going ahead with a ban on foreign buyers and points to figures released by Statistics NZ showing that for the March quarter, only 627 of 19,014 property transfers were to people who didn't hold New Zealand citizenships or resident visas.

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